Top 9 Tax Saving Tips for Freelancers

Freelancing offers freedom, but coming off taxes can be complicated.  
 
The good news? With the right tax-saving strategies, you can save big while staying lawfully compliant. 
 
Let’s explore some of the practical tax saving tips to help you maximize tax savings and keep more of your income to yourself. 
 
1. Choose Correct Business Structure   

As a Freelancer, it is only wiser to consider your freelance work as a business as you can avail major tax benefits on your business income.  

However, choosing the correct business structure for your maximum benefit is crucial, as each structure, whether proprietorship, partnership, LLP, or company has its own tax implications. Each structure offers unique benefits according to your situation. 

Consult a professional to choose what’s most suitable for your case. 

2. Claim Expenses on your Business Income 

Once you choose the appropriate business structure for yourself to disclose your business income, you can claim expenses as deductions incurred for your business operations.  

Only condition is that they must be directly related to your freelance work. 

Expenses that are allowable as deductions are: 

• Rent of the Property: If you rented a property to carry out your work, you could deduct the rent. 

• Repairs Undertaken: If you paid for repairs to the rental property, the costs can be deducted.  
  Repairs for your laptop, printer, and other work-related equipment can also be deducted.  

• Depreciation: If you’re planning to purchase a big asset like a car, laptop, or machinery, instead of buying it personally, consider purchasing it in your business’s name and using it for business purposes.  
  
  This way, you can claim depreciation on it, allowing you to spread the cost over its useful life and reduce your taxable income year by year, rather than claiming the full cost upfront. 

• Office expenses: Expense incurred to carry out your work, such as purchasing a printer, office supplies, your monthly telephone bills, internet bills, and conveyance expenses can be claimed as a deduction. 

• Travel expenses: Travel expenses for meetings with clients within or outside of India are also allowed. 

• Meal, entertainment, and hospitality expenses: Expenses on these are deductible, provided the money was spent exclusively to acquire new business or retain existing clients. 

• Local Taxes & Insurance: Applicable for your business property. 

• Digital Expenses: Domain registration, apps, and tools for work. 

3. Tax Saving Investments 

In addition to the expenses, you are allowed to claim deductions on your business income while filing taxes.  
 
These deductions can significantly lower your taxable income but are only applicable if you opt to file under business income. 
 
Tax Deductions Allowable Under Old Regime:  

• Section 80C: Deductions for investments in life insurance premiums, home loan principal, pension plans, ELSS, SSY, and SCSS.  
  Max Limit: ₹1.5L per FY. 

• Section 80D: Deductions for medical insurance premiums.  
  Max Limit: ₹25k for Individual/HUFs <60 yrs. ₹50k for senior citizens ≥ 60 yrs.  
  If paying for self, family & senior citizen parents, the total limit can reach ₹75k per FY. 

• Section 80E: Tax deductions for education loan interest.  
  Max Limit: No limit 

• Section 80EEA: Interest deduction on home loans for first-time homeowners.  
  Max Limit: ₹1.5L per FY. 

• Section 80G: Deductions for donations to social causes.
  Max Limit: 50/100% amount (with or without qualifying limit) of donation depending on the NGO.  
  Cash donations are subject to ₹2k only. 

• Section 80GG: Deductions for paid house rent.  
  Max Limit: ₹6k per month subject to 25% of Adjusted Total Income or rent paid in excess of 10% Adjusted Total Income, whichever is lower. 

• Section 80TTA: Interest deductions for savings account holdings.  
  Max Limit: ₹10k. 

• Section 80U: Deductions for individuals with disabilities.  
  Max Limit: ₹75k (disability ratio-40%), ₹1.25L (disability ratio-80%). 

* These deductions will not be available to a taxpayer opting for the new tax regime u/s 115 BAC.  

Deduction allowable under new regime:  

• Section 80CCD(2): Deductions for employer contributions to Central Government pension schemes.  
  Max Limit: 14% of one’s salary. 

• 80JJAA: Deductions for employment generation, applicable to new workers.  
  Max Limit: 30% deduction on additional employee costs for 3 yrs from the hiring year. 

4. Opt for Presumptive Taxation 

Section 44ADA 
If detailed expense reporting or deductions aren’t providing maximum tax savings, you can consider disclosing your income under Presumptive Taxation Scheme.  
 
Under this, tax is applicable on only 50% of your gross income, simplifying the reporting process. 
 
However, consider consulting an expert before drawing any conclusions. 

 
Section 44AD 

If your business turnover is less than ₹2 crore, you can opt for Section 44AD to simplify tax compliance. Under this scheme: 

• You can declare 8% of your turnover as taxable income if transactions are in cash. 

• You can declare 6% of your turnover as taxable income if receipts are through digital means. 

(Business expenses mentioned in the second point are not allowed if opted for presumptive taxation) 

5. Choose the Right Tax Regime: Old vs. New 

When filing your taxes, you have the flexibility to choose between the Old Tax Regime and the New Tax Regime based on what suits you best.  

Consulting a tax expert can help you make an informed decision and maximize your savings. 

 
* Surcharge Rates: 
Up to ₹50 Lakh: Nil,  
Above ₹50 Lakh to ₹1 Crore: 10%  
Above ₹1 Crore to ₹2 Crore: 15%,  
Above ₹2 Crore to ₹5 Crore: 25%  
Above ₹5 Crore: 37% (only under Old Tax Regime)  

* Health & Education Cess: 4% on income tax plus surcharge (if any) for both regimes.  

* Rebate under Section 87A:  

• Old Tax Regime: Up to ₹12,500 for income up to ₹5,00,000.  

• New Tax Regime: Up to ₹25,000 for income up to ₹7,00,000.  

6. Professional Fees Paid 

Freelancers are also allowed to get deductions for expenses such as fees paid to accountants, legal advisors and consultants to manage your business. 

So, rather than seeing it as mere expenses, think of it as value additions that empowers your business.  
 
It’s a Win-win – You invest in expert advice and can save on tax liability too. 

 
7. GST Registration 

While GST registration is not necessary by law unless your turnover crosses the threshold limit of ₹20 Lakhs.  

You can still claim input of GST for mobiles, laptops for business, or any other eligible expense used for business provided you are registered under GST. 
 

So, if your business engages a lot in these transactions, it is only beneficial for you to have a GST. 
 

8. Timely Filing of Advance Tax 

Freelancers are taxed under ‘Income from Business & Profession’ and must pay advance tax if their annual tax liability exceeds ₹10,000. 

Advance tax payments are calculated quarterly, with specific percentages due by the following dates: 

• 15th June: Pay 15% of the total annual tax. 

• 15th September: Pay 45% (cumulative). 

• 15th December: Pay 75% (cumulative). 

• 15th March: Pay 100% (cumulative). 

Missing these deadlines can attract interest & penalties under Section 234B & 234C of the Income Tax Act. Timely filing ensures that you avoid unnecessary penalties and keep your financials in order. 
 
9. Keeping Proper Accounting Records 

Lastly, disorganized data can lead to significant time and financial loss during tax filings and legal compliances.  

While maintaining accurate records of all business transactions may involve an initial effort, it saves considerable time and ensures a hassle-free tax filing process. Remember, time is money—staying organized is a smart financial decision. 
 
Tax planning doesn’t have to be stressful. 
 
With 10+ years in experience, we have helped 1000+ freelancers with their taxes and legal compliances. 
 
Don’t miss out!  

Call/WhatsApp now at +91-9310183397 to book a personalized consultation.